Appreciating the genius of cryptocurrency and Hex.Win

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Disclaimer: This is not financial advice or a recommendation to go out and do anything to do with cryptocurrency

First off - here is a link to my Limited Company Website - self plug Info Rhino

Here is a link to the Hex disclaimer - 

First off - here is my Hex.Win referral address. It would be great if people fancied registering after reading this post. 

A simple example of cryptocurrency in practice

I want to give a genuine example of why cryptocurrency offers so much more than normal money. The example I give, sounds a little extreme. Indeed, many parents don't mind their teenagers having booze and weed, but it is important to understand the concept.

Imagine you are a parent of a teenager. The child says they want to go to the cinema with their friends. You are suspicious that they might buy some weed and alcohol. You have several choices; say no, buy them tickets for the cinema - maybe a voucher for snacks, or accompany them and score some for yourself?

Assuming you are a responsible parent. A better way would be to put some money into a smart contract, which would;

  • Expire after the weekend - if the contract wasn't exercised, the funds could be returned.
  • Requires them to enter the cinema for the contract to kick in.
  • Could only buy cinema tickets.
  • Could only buy food from the cinema.
  • Can get a bus journey home.
  • Includes provision for a taxi.

If you are a software developer, are of a financial background, or have worked with online payment handling - you can appreciate the amount of effort it would take to build the above example. More than likely, it would involve many third-parties - ultimately, you have counterparty risk. How do we know the cinema chain wouldn't go bust and our funds gets lost?

The mystery of cryptocurrency to the masses

In many ways, having an understanding of cryptocurrency is a lot like being a proponent of the motor car. All those people riding their horses thinking it can't get any better. In Paris, in 1894, there was the "Great Horse Manure Event". Just as there are predictions on global warming, as there were predictions on global cooling in the 1970's, so there was a prediction that every street in London would be under 9ft of horse manure.

Now of course, we have major concerns and scientific evidence deleterious health effects from pollution from the common motor car in cities. Again, we have a need for a new kind of transportation.

Finance and money

It is exactly the same with the financial system. We have this fractional reserve banking system which allows banks to print money out of thin air, governments to inflate their balance sheets, and people tied to ever reducing purchasing power. Sadly, very few people understand this.

Measure Cryptocurrency Fiat (Cash) Precious Metals
Unit of Account Yes Debatable Yes
Medium of Exchange Yes Yes Yes
Store of Value Yes No Yes
Is Money Yes No Yes


What you talking 'bout Willis?

Fiat - pounds, dollars, yen, euros is not a store of value. Its purchasing power decreases every year because of inflation. Furthermore, fiat is not even a unit of account? For those who are interested, read up on the missing $21 Trillion report by Dr Mark Skidmore and Catherine Austin-Fitts report. They identified at least $21 trillion which has been printed and lost - probably in the Exchange Stabilisation Fund. 

In a direct response to the above queries, it has been claimed that FASB60 (Financial Accounting Standards Board) has been extended to prevent the need for accounting when in the need for national security.

The claim is, that by hiding the amount of dollars printed, supply appears smaller, thereby increasing value.

I digress

How hard are cryptocurrencies for people to understand?

Very - the whole concept blows their minds. In the same was as; commercial paper, repos, reverse repos, derivatives, interest rate swaps, cross currency interest rate swaps, bonds, zero coupon bonds, collateralised loan obligations and many many more, are completely unfathomable to individuals - so too are cryptocurrencies.

Lucky to have worked in finance and come to work on many reporting and data applications around different financial initiatives to understand more about finance than the average Joe. It wasn't until my venture into cryptocurrency 2.5 years ago, was it that a true understanding arose, on the mechanics of money.

The simple way to think about cryptocurrency

I look upon cryptocurrency, as does many others, as hard money. Indeed certain cryptocurrencies are the hardest money possible. They provide all the features of the financial system without the reliance on a middleman to control the money. To many, this appears a bad thing, but fundamentally it gives freedom to billions of people around the world.

Indeed, this freedom, and money without borders lets you - for the first time, send money around the world without involving the many layers of banking.

The main challenge with cryptocurrency is the responsibility you have for your keys. At the moment, you can turn up to a bank with your passport and probably take some cash out. It is not possible to do this with Bitcoin - the only thing Bitcoin cares about is your private key. This isn't saying your passport cannot be encoded into a private key and this can be used in the future.

What about Hex?

Taking the time to learn about Hex, has opened up my eyes to the true possibility of cryptocurrencies versus fiat money. Hex, is effectively - a certificate of deposit which bears interest. Think of it like buying a bond, and only being able to take the cash out at the end.

Hex is a token, which sits on the Ethereum Blockchain, and is a smart contract. A Smart contract is a programmed set of rules determining what happens with any capital placed into a contract. 

Hex gives no promise that the Hex themselves will be worth anything in the future - which avoids the idea of it being a security.

The hope is Hex will accrue value, and these imaginary increases will eventually be exchangeable for other currencies and fiat in the future. What avoids this being a Ponzi scheme, is that there is always going to be a certain amount of capital reserves in the system. Hex will not rely upon a continual stream of newcomers to recruit more newcomers and what is very interesting, is you don't need to put any physical cash in at all.

Why doesn't Hex ask for any cash?

You can put Ethereum into the contract, which acts like an accumulator, but effectively - Hex simply confirms you own some Bitcoin and then gives you some Hex in return. You do not provide any private keys to your Bitcoin, you are free to spend your Bitcoin, and there is no demand for cash. This is important as it cannot count as an investment.

What are the risks?

Aside from the risk of doing something completely stupid - minimal.

Obvious risks include; your time, and a tiny charge for transaction costs with Ethereum. So, the ethereum network has charged me, say 50 pence (GBP) to set this up.

The other big risk is - Hex never attains any value. My feeling is (not a promise) - Hex is going to be engaging in token swaps. Imagine there is a car hire smart contract, you can use these tokens to hire a car. The eventual situation is Hex may become interchangeable with fiat and other assets.

What made this "Hex" Experience so interesting?

There are many genuine use cases for cryptocurrencies. There are many disasters. At the moment, and I am paraphrasing Richard Heart - crypto is currently in speculation phase. The people making money are the exchanges - and for the main, the coins are locked away in hardware wallets.

There are many other examples to Hex, but what makes it different is the experience of;

  • Signing up for the MetaMask online wallet and being happy to trust it with some ethereum.
  • Sending ethereum to the Metamask wallet.
  • Using the Ledger Nano with an Electrum Wallet.
  • Upgrading the Ledger Nano and seeing that it still works and the crypto hasn't been lost.
  • Reviewing the transactions, addresses, and balances.
  • Signing the Bitcoin Addresses with the Hex.Win reference and verifying with the Ledger Nano.
  • Seeing how quick and easy it is to move crypto around.
  • Understanding there are no middlemen in the process.

My closing thoughts are - yes, crypto is scary. You can't turn up to the cryptocurrency wallet if you lost your credit card. The key takeaway is - it is all about opening up trust to different blockchains and good honest actors, but being hyper-aware of potential scams.

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